Despite stubborn inflation, currency devaluation, the growing cost of raw materials and a series of wage increases over the past two years, manufacturers in Egypt told Sourcing Journal that the outlook has “changed dramatically” in the past few months.
“From my point of view, Egypt is just getting rediscovered,” Rajat Gupta, chief marketing officer at Winway Global Apparel, said. His company, which is based out of China, set up their production unit in the Islamia Public Free Zone in August 2024, with plans to expand in coming months. Given the changing geopolitical situation since then, many other Chinese companies have been moving quickly to adjust their sourcing models. As the threat of higher tariffs on exports from China to the U.S. inches closer, many manufacturers are urgently stepping up their search for other sourcing destinations. Egypt’s free trade agreement (FTA) with the U.S., and a strong outlook for 2025 in terms of economic recovery are making the locale more appealing than ever.
“There were a lot of challenges in the past in Egypt, in terms of the economic and political situation, as well as a strong focus of big manufacturers on Asia with its high production efficiencies. But things have been changing fast,” Gupta observed. Among the factors leading this change: the availability of raw materials, local workers and reasonable wages.
“Our factory is still relatively new; in the first phase we have 10 lines already running and in the next six months it will be up to 26 lines. In the second phase there will be additional 30 lines, totaling to 56 lines by 2026. That shows our commitment as well as the interest in the country,” he said.
While some manufacturers have commented on the country’s comparatively low efficiency, and high absenteeism, Gupta believes that it is possible to counter these.
“Although efficiencies are low, we have mastered it as we work with a standardized replication system, where we have a centralized system in China and we are able to seamlessly create that in each country so that it remains consistent. I think there is going to be more action and rediscovery. The large manufacturers will play a bigger role in managing the work force,” he said.
Other global manufacturers agree.
“Egypt really has come to the forefront,” noted Siddharth Sinha, founder and chairman, Velocity Egypt, who has spent three decades manufacturing and exporting apparel from the country. He added that there were various triggers that were pushing it forward at this time. Velocity manufactures for several global brands including Inditex and American Eagle.
“On the one side you have China that’s already been hit hard. At the same time, in Turkey prices have gone up so much that it is falling out of the manufacturing race. Vietnam already has a shortage of labor, and the situation in Bangladesh is unstable at this time. Meanwhile, Egypt has a very strong infrastructure, and it is stable and well controlled which is key for manufacturers. The factories don’t have to worry about power cuts and shortages, and the transport systems are good. In addition, the geographical location of Egypt itself is very good and it has a large population of more that 120 million—a young population.”
“I think the other interesting part is that Egypt has some promising mills,” Sinha observed. “But they are very localized, their international exposure is lacking—and you can see that in the efficiency, their use of new developments and communication styles. More foreign investments and joint ventures would change the way things work. Sourcing fabric locally is going to continue to play a critical role to support the garment industry, as well.”
He said that this change in working style was apparent in the factories themselves. “The efficiencies are picking up. This has been changing as more global companies are coming in, and the mindset is changing.The last few years in Egypt haven’t been easy, however.
Local manufacturers said that they have been trying to keep up with a variety of economic issues. Annualized inflation was down in 2024—to 25.5 percent. There has been a period of heavy adjustment as the government has realigned and reduced subsidies in response to a plan by the International Monetary Fund (IMF) which approved a $3 billion loan to Egypt in December 2022. This was expanded to $8 billion in March 2024.
These loans bring with them stringent requirements, and part of the fallout has been a steeply plummeting currency. The Egyptian pound fell by 40 percent against the dollar from May 2022 to January 2023, and another 39 percent over the last year, hovering at an approximate 50 Egyptian pounds to one U.S. dollar in recent months.
Meanwhile the minimum wage has doubled over the last two years. In January 2022 it was 2,400 Egyptian pounds. In May of 2024 the minimum wage increased to 6,000 Egyptian pounds ($118.35) a month.
According to Hala El Said, minister of planning and economic development, this move was part of “the commitment to safeguarding the interests of workers amidst evolving economic landscapes, both domestically and internationally.”
Manufacturers told Sourcing Journal that they have been adjusting to these changes. But it has been difficult. It has also spurred a further openness to foreign investment.
Fadil Marzouk, chairperson of the apparel export council of Egypt, said that the rise in foreign investments in the apparel sector has been primarily from countries such as China, Vietnam, Turkey and India, alongside increased local investments and factory expansions.
Meanwhile, the industry has been looking up: In the first 10 months of 2024, Egypt’s ready-made garment exports increased by 17 percent to $2.27 billion. This is up from $1.94 billion during the same period in 2023, with the U.S. as the biggest importer of Egypt’s apparel exports, followed by EU and other Arab nations.
Ravi Hurpaul, managing director, Regal House Consulting, has been watching the changes closely. His company focuses on driving sustainable growth and operational excellence in the apparel industry, and has worked with a number of global brands, including Victoria’s Secret, Abercrombie & Fitch, Lane Bryant and others over the last four decades.
“Looking at the region, you can see that sports brands like Adidas and Nike have a strong presence in the country. They have volume, they have FTA benefits—volume is everything there,” he explained.
The road ahead, however, will not be easy.“If Egypt wants to be a big, competitive player in the apparel industry they will have to make a big shift,” Hurpaul observed. “They need to open up to the entrepreneurs more so they can bring in people with knowhow and more expertise. They need to bring in skill, and tap into competitive markets. Right now, they are known for their cotton and that will continue, but in Egypt, the challenge is retaining labor. The foreign investor can bring in automation—which they are— but educating the work force for long term sustainability needs time,” he said, citing the example of Jordan, where labor has been brought in from different countries.
He noted that while there are indeed challenges, it is also the moment to seize the opportunity.
“If you’re talking to a country that is fully developed that means the opportunity is already taken. So, it’s like another starting point. Rediscovering the country both from a fabric point of view and garment point of view,” he said. “Overall, I think there is going to more action and rediscovery.”
This article ran in SJ’s Sourcing Report 2025. To download the full report, click here.
